Reply #11: The leases are for a certain duration. [View All]

[Igel]

They haven't violated the terms of the leases if they sit on them.

Now, much of the land is almost certainly fairly useless for oil. They get no profit from ignoring useless land, and none from returning it to the feds. So why not sit on it?

The problem is that much of the land hasn't been properly explored. That takes time, and they usually explore more promising territory first. It costs money to explore. Exploring territory that's highly unlikely to return a profit is, well, silly. But often you have to lease large chunks of useless territory to get access to the parts you want access to.

So as far as leases go: Sitting on them has no downside, and might have an upside. They'll expire eventually.

There's a nifty federal report that looks at lands that have been probed and which are likely to contain petroleum deposits. Then there's a Congressional report misquoting the nifty report, and confusing % of oil with % of land. A large percentage of untapped oil reserves aren't available for drilling. Most known, untapped oil reserves that could be drilled occur on a fairly small fraction of the leased territory. The latter point is, oddly, exactly what you'd expect, so you'd expect Congress to have to do some selective misquoting to show otherwise.

Now, consider Mexico's problem with oil fields. They have territory they know contains oil. But they lack the technology to get to it. Some of the known oil in lands that *can* be drilled probably hasn't been profitable to get to. Having the feds revoke the leases and re-bid the leases wouldn't make them any more profitable. Crank the price of oil ... they might be profitable. However, given the low price of oil until fairly recently there wasn't much motivation to invest in oil exploration equipment so most companies didn't, and it can take years to develop a field. Now there's motivation, worldwide, and so the equipment's very much in demand, so much so that there's a bit of a shortage. Moreover, most of it (like most of the oil production) is in the hands of governments, not "big oil", so don't expect the oil fields in the US to be pumping oil any time soon.